In response to the recent U.S. Supreme Court decision in Burwell v. Hobby Lobby, Inc., the U.S. Departments of Health and Human Services (HHS) and Labor (DOL) published proposed rules on August 22, 2014, expanding the availability of the religious accommodation to the contraceptive mandate provided in their July 2013 final regulations to closely held for-profit entities.

HHS and DOL and Treasury also published interim final regulations amending the regulations to provide an alternative form of notice of a plan sponsor's religious objection to all or a subset of contraceptive services required to be covered as a preventive services benefit under the Affordable Care Act.

As illustrated by our five earlier legal alerts on this subject, one of the most litigated provisions of the ACA employer plan mandate is the obligation to provide contraceptive services coverage without cost-sharing as a preventive services benefit. In response to strong opposition by certain religious organizations, in July 2013, HHS, DOL, and Treasury adopted final regulations offering an accommodation to the coverage requirement for church and other religious nonprofit employers.

In a slew of lawsuits, organizations eligible and ineligible for the accommodation challenged the adequacy of the relief provided in the final regulations. This June, the U.S. Supreme Court held in Burwell v. Hobby Lobby, Inc., that the accommodation also should be made available to closely held for-profit entities with religious objections to the contraceptive mandate. Shortly thereafter, the Supreme Court entered an interim order enjoining the enforcement of the regulation with respect to eligible religious nonprofits in Wheaton College v. Burwell. The interim final and proposed regulations released by the agencies respond to these challenges.

Eligible Organizations The proposed regulations acknowledge that an organization organized and operated as a closely held for-profit entity may be an eligible organization under the accommodation regulations but reserve and seek comment on the definition of such an entity. The regulators suggest for comment two approaches: the Subchapter S corporation type definition where none of the ownership interest are held by a publicly traded entity and where the entity has fewer than a specified number of owners (e.g., 100) or the real estate investment trust type model where none of the ownership interests are held by a publicly traded entity and in which a specified fraction of the ownership interests is limited to a specified number of owners. Comments must be submitted no later than October 21, 2014.

Obtaining the Accommodation In the interim final regulations addressing the concerns of the eligible religious organizations, the agencies provide for an alternative written notice to qualify for the accommodation. Under the new alternative, an employer must provide a notice to the Secretary of HHS that states the name of the organization, describes its objection to providing coverage for all or a subset of the contraceptive services based on sincerely held religious beliefs, and identifies the plan name, whether the plan is a church plan or student plan, and the service provider's name, contact information, and category (insurer or TPA). A model notice is available but not required to be used. See, http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Model-Notice-8-22-14.pdf.

The 2013 regulations established mechanisms for separately funding the coverage for insured and self-insured plans to assure that coverage was provided to the covered plan members notwithstanding the employer's objection. Under the new alternative, upon receipt of the notice from the plan sponsor, the government will notify the TPA or insurer of the plan sponsor's objection and advise it of its obligation to provide or arrange for the payment for contraceptive services to the plan member and covered beneficiaries without cost-sharing or imposing a fee or charge upon the plan member or the plan sponsor as set forth in the regulations.

An eligible organization may still use the EBSA Form 700 and notify the TPA or insurer of its objection directly.

Questions remain whether the amended regulations require a church plan offered by an eligible organization to comply with the coverage and funding mechanisms in the regulations.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the ACA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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